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Kroger to buy Harris Teeter for about $2.44B

NEW YORK (AP) — Kroger, the country's largest traditional supermarket operator, said Tuesday that it has agreed to buy Harris Teeter Supermarkets Inc. for about $2.44 billion in cash, boosting its presence in key southeastern and mid-Atlantic markets.

Under the terms of the agreement, Cincinnati-based Kroger will pay $49.38 for each of the supermarket chain's shares. The price represents a 2 percent increase over the company's Monday closing stock price.

"This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates," Kroger Chairman and CEO David Dillon said in a statement.

The deal has been approved by both companies' boards, but remains subject to Harris Teeter shareholder approval. Harris Teeter announced in February that it was exploring strategic alternatives, including a possible sale.

Harris Teeter operates 212 stores in eight southeastern and mid-Atlantic states and Washington D.C., along with a pair of distribution centers and a dairy facility in North Carolina. Its fiscal 2012 revenue totaled about $4.5 billion.

In comparison, Kroger operates 2,419 stores in 31 states. In addition to its flagship brand of supermarkets, it also owns Ralphs, Fry's, Food 4 Less and other brands. The acquisition adds another three states to its store footprint.

In a conference call with investors, J. Michael Schlotman, who is Kroger's chief financial officer, said the deal marks Kroger's entry into several attractive, high-growth markets such as Charlotte, N.C., and Washington D.C.

Of Harris Teeter's 212 stores, 138 are located in North Carolina, with 55 of those in the Charlotte area. Another 55 stores are located in the Washington D.C., area, Schlotman said.

After the deal closes, Harris Teeter will become a Kroger subsidiary and will continue to be led by members of its current senior management. There are no plans to close stores and the division will remain based in Matthews, N.C.

Kroger Co. says it expects the deal to result in cost savings of $40 million to $50 million over the next three to four years. It will finance the deal with debt and plans to assume Harris Teeter's outstanding debt of about $100 million.